Office of the Auditor General Victoria Hall 11 Victoria Street Hamilton HM 11, Bermuda Tel: (441)296-3148 Fax: (441)295-3849 Email: auditbda@gov.bm Website: www.oagbemiuda.gov.bm AUDITOR'S REPORT To the Minister of Finance I have audited the balance sheet of the Government Employees Health Insurance Fund as at March 31, 2002 and the statement of revenues and expenses and fund equity for the year then ended. These financial statements are the responsibility of the Fund's management. My responsibility is to express an opinion on these financial statements based on my audit. Except as explained in the following paragraph, I conducted my audit in accordance with auditing standards generally accepted in Bermuda and Canada. Those standards require that I plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I was unable to obtain sufficient appropriate audit evidence to support the accuracy and completeness of contributions revenue of $21,234,722. As a result, I was unable to determine whether adjustments might be necessary to contributions revenue, excess of revenues over expenses, assets and fund equity. In my opinion, except for the effect of adjustments, if any, which I might have determined to be necessary had I been able to verify contributions revenue as described in the preceding paragraph, these financial statements present fairly, in all material respects, the financial position of the Government Employees Health Insurance Fund as at March 31, 2002 and the results of its operations for the year then ended in accordance with accounting principles generally accepted in Bermuda and Canada. Hamilton, Bermuda November 24, 2003 Larry T. Dennis, C.A. Auditor General 205 GOVERNMENT EMPLOYEES HEALTH INSURANCE FUND BALANCE SHEET MARCH 31, 2002 2002 2001 $ $ 13,553,246 56,249 12,752,426 79,588 13,609,495 12,832,014 110,825 2,289,152 3,878,759 84,017 1,451,241 88,000 999,226 4,230,867 333,108 1,495,375 87,822 7,813,994 7,234,398 5,795,501 5,597,616 13,609,495 12,832,014 ASSETS CURRENT ASSETS Due from the Consolidated Fund of the Government of Bermuda (note 3) Premiums receivable LIABILITIES AND FUND EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities Claims payable to Bermuda Hospitals Board Other claims payable Portability received in advance Contributions received in advance Premiums payable to Mututal Re-insurance Fund (note 5) FUND EQUITY The accompanying notes are an integral part of these financial statements. 206 GOVERNMENT EMPLOYEES HEALTH INSURANCE FUND STATEMENT OF REVENUES AND EXPENSES AND FUND EQUITY FOR THE YEAR ENDED MARCH 31, 2002 2002 2001 $ $ 21,234,722 917,670 20,127,924 772,506 22,152,392 20,900,430 20,288,306 1,094,671 488,893 29,198 17,800 16,500 8,373 7,562 1,529 1,675 16,759,011 1,040,170 253,500 3,310 24,700 16,500 5,131 21,954,507 18,110,595 197,885 2,789,835 FUND EQUITY, BEGINNING OF YEAR 5,597,616 2,807,781 FUND EQUITY, END OF YEAR 5,795,501 5,597,616 REVENUES Contributions (note 4) Interest EXPENSES Claims (note 4) Premiums - Mutual Re-insurance Fund (note 5) Salaries Consulting Administration Audit fees Postage Software Supplies Miscellaneous EXCESS OF REVENUES OVER EXPENSES 7,272 1,001 The accompanying notes are an integral part of these financial statements. 207 GOVERNMENT EMPLOYEES HEALTH INSURANCE FUND NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 2002 1. AUTHORITY The Government Employees Health Insurance Fund ("the Fund") was established under the Government Employee (Health Insurance) Act 1986 and its subsequent amendments. The Fund provides health insurance benefits for government employees, Ministers and Members of the Legislature, and their enrolled dependants and covers medical expenses, such as hospital stays, doctor's visits and prescription drugs. The Fund derives its revenue from contributions received from its members and the Consolidated Fund of the Government of Bermuda. Enrolment in the Scheme is compulsory for all government employees and voluntary for Ministers and Members of the Legislature. Contributions are matched by an equivalent amount from the Consolidated Fund. 2. SIGNIFICANT ACCOUNTING POLICIES The financial statements have been prepared in accordance with accounting principles generally accepted in Benriuda and Canada and include the following significant accounting policies: (a) Translation of Foreign Currencies The financial statements are reported in Bermuda dollars. The Bermuda dollar is at par with the United States dollar. Assets and liabilities are translated at the exchange rate prevailing at the balance sheet date. Revenues and expenses are translated at the exchange rate in effect of the transaction date. Translation gains and losses are included in the statement of revenues and expenses and fund equity. (b) Use of estimates The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues earned and expenses incurred during the year. Actual results could differ from these estimates. 208 GOVERNMENT EMPLOYEES HEALTH INSURANCE FUND NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 2002 3 DUE FROM THE CONSOLIDATED FUND OF THE GOVERNMENT OF BERMUDA . The amount of $13,553,246 (2001 - $12,752,426) due from the Consolidated Fund of the Government of Bermuda represents the net position of certain revenues received and expenses paid by the Consolidated Fund on behalf of the Fund, which has not yet been reimbursed. The rate of interest accruing on the balance is 7% per annum. 4. PRESENTATION OF THE FUND The Government Employees Health Insurance Fund (GEHI) and the Supplementary Insurance Scheme Fund (SIS) have been combined as of April 1, 1996. The two Funds fall under the Government Employee (Health Insurance) Act 1986 and its subsequent amendments and, in management's opinion, should be presented together. 2002 $ Contributions GEHI SIS 2001 $ 20,659,647 575,075 21,234,722 16,273,700 485,311 20,288,306 5. 20,127,924 19,554,574 733,732 Claims GEHI SIS 19,559,056 568,868 16,759,011 PREMIUMS - MUTUAL RE-INSURANCE FUND The Fund pays premiums to the Mutual Re-insurance Fund which provides reinsurance for the costs of haemodialysis treatment, long-stay hospital care, home health care, kidney transplants and the required anti-rejection drugs. 6. RELATED PARTY TRANSACTIONS The Bermuda Hospitals Board, the Mutual Re-insurance Fund, the Consolidated Fund and the Government Employees Health Insurance Fund are under the common control of the Government of Bermuda. All transactions between the Govemment Employee Health Insurance Fund and the related parties are in the normal course of operations. 209 GOVERNMENT EMPLOYEES HEALTH INSURANCE FUND NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 2002 7. STATEMENT OF CASH FLOWS A statement of cash flows has not been prepared as it would not provide additional useful information. 8. SUBSEQUENT EVENT An employee of the Fund was convicted of submitting fictitious claims approximating $160,000 for fiscal years 2002, 2003 and 2004. Thus, his employment was terminated. 9. COMPARATIVE FIGURES Certain comparative figures have been restated to conform to the current year's presentation. 210